Deciding to go into business for yourself is a big decision. There is always a pretty long list of things you need to do or accomplish, which means you’ll find yourself wearing many hats throughout the day. However, if your business isn’t making money, it is nothing more than a hobby.
Now is the time for you to take the time to properly manage and organize your small business finances. This will help contribute to the overall success of your business and ensure you are able to hit your profit goals. Like your personal finances, there are several ways for you to get your business finances organized, and the methods used often depend on your goals.
You need to know what your business makes. You can choose to track your income on a daily, weekly, or monthly basis. Doing this helps you have a better understanding of what you are bringing in.
It’s a good idea to use a spreadsheet to keep track of your income. Or, you can invest in software that offers financial records management. The end goal here is to break your income down into categories that represent all the streams of income that your business currently has.
If you plan to track your income, you need to make sure you are tracking your expenses, too. All entrepreneurs have certain expenses that must be paid to keep the business running properly. Also, some of the expenses you incur can be deducted from your taxes, which is going to reduce your taxable income. It is also going to reduce how much money you put in your own pocket. This results in most business owners having a lower net income than gross income.
You can easily track your expenses like how you are tracking your income. By doing this, you will also have an easy way to audit these expenses regularly, which means you won’t be overspending on unneeded costs.
When your business starts to make money, you need to separate your personal and business finances. If you don’t, there’s a good chance you are going to regret it. When tax time rolls around, you are going to wind up getting confused because of how unorganized everything is. It can take you countless hours to get things organized once again.
All this frustration can be avoided if you open a separate bank account for your business. For businesses with an EIN number, you can create a business bank account or if you don’t have an EIN, you can open a separate personal account and use it as your business account.
Make sure that your income filters through the business account and that this is the account you pay all your expenses from. Every month you will get a statement related to your business, making it much easier to keep up with your cash flow.
Every business is going to require a certain level of protection. While this is true, you must figure out what is right for you. For some, business insurance is enough. However, for others, it may mean establishing a S-Corp or an LLC, which allows you to separate your business and personal finances.
This is beneficial if you are ever facing legal issues in your business. If this happens, and your finances are separate, then the issues won’t affect your personal property, assets, money, etc. This level of protection is invaluable.
If you want to get your business finances organized and keep them that way, it is important that you use the tips and information found here. Doing so is going to pay off and help ensure your business and personal finances are organized and easy to understand. Being informed is the best way to ensure that your business finances are organized and that you don’t have any financial issues in the future.
Publish Date: January 20, 2020 11:07 PM